[R-SIG-Finance] How to interpret this formula?

[Joe W. Byers]

Arun,

This is a Moneyness calculation for options to normalize a set of 
options at a standard reference location around 0.  it is not an options 
implied skewness, though most literature on option implied skews use a 
normalization metric of this type.

I used it in my dissertation and originally saw it in works by Derman, 
etal of Goldman Sachs.  Other common normalizations are a delta 
equivalent at pre-set intervals: +/-5%, +.-10% around ATM delta, or 10, 
25, 50, 75, 90 deltas.

Good Luck
Joe W. Byers

On 10/12/2013 03:03 PM, R. Michael Weylandt <michael.weylandt at gmail.com> 
wrote:
> I'll admit it seems rather fishy --
> impossible perhaps to have something 'implied' by the option price without the option price in the formula -- but it's a hair off-topic for an _R_ finance list.
>
> Perhaps quant stackexchange would work? But unless you're willing to share your reference, I doubt folks there will be able to help you much.
>
> In general, if you want folks to help you understand what you are reading you should tell them what you are reading in the question.
>
> Michael
>
> On Oct 12, 2013, at 15:53, Arun Kumar Saha <arun25558038 at gmail.com> wrote:
>
>> Hi,
>>
>> I have come across a formula to calculate the Option implied skewness which
>> is calculated as (Strike/underlying's price - 1)
>>
>> Has anyone come across a similar type of formula?
>>
>> Can somebody please explain how can I derive that? Any online
>> reference/paper is highly appreciated.
>>
>> Thanks and regards,
>>
>>     [[alternative HTML version deleted]]
>>
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